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Yes, there is a tax rise
Yes, there will be losers.
Mr. Darling: As I said, I believe that having a single rate for capital gains tax is the right thing to do. There are personal allowances of £9,200 and a continuation of roll-over relief that enables people who sell their business and want to re-invest to do so. Inevitably, whenever changes are made to the tax system and the rate is simplified, there will be people who do not like the changes, but they are the right thing to do in the long-term interests of business.
Mr. Osborne: The Chancellor did not actually answer my question and spell out who will lose out, so I will have to do it for him. Millions of small businesses will lose out, and millions of employees who have shares in their company could be at risk. The whole entrepreneurial culture that the previous Chancellor used to bang on about from the Dispatch Box is under threat. That is why the Governments small business adviser says that the change will penalise investment and Labour Members on the Select Committee are urging the Chancellor to reconsider. Even his good friend the Secretary of State for Business, Enterprise and Regulatory Reform is now lobbying the Treasury to reconsider. Why does the Chancellor not admit that he has made a mistake on capital gains tax and get the U-turn out of the way quickly? The latest survey of business opinion shows that fewer than one in five think that he understands business. He has ceded so much of the political and intellectual agenda to us: why not cede a little more?
If I were the hon. Gentleman, I would not rely over much on surveys if they consist of asking 12 people what they think about a proposal that had not even been promulgated at the time that they were
questioned. When we find that one person seriously considered emigrating, we can hardly be impressed by that.
In relation to the proposals generally, I think that simplifying the tax system is necessary and a single rate of capital gains tax is the right thing to do. Although I accept that some people are not entirely happy about it, others have welcomed the proposal, and therefore I intend to proceed with the changes that we are making. In the long term, they will benefit businesses, along with all the other measures that we are taking to support businessnot just small businesses, but larger companies, through the reduction in corporation tax.
The Chief Secretary to the Treasury (Andy Burnham): Between 1997-98 and 2005-06, average net council tax paid by households has increased by £6 a week in real terms. Over the same period, disposable income increased by £90 a week in real terms.
Greg Mulholland: I thank the Chief Secretary for that answer, but the Chancellor has already said this morning that councils should not have to keep raising council tax. However, in the pre-Budget statement, he said that it will rise by up to 5 per cent. every year. The average council tax bill for a band D property was £688 in 1997 and it will be £1,529 at the end of the comprehensive spending reviewan increase of 122 per cent. How can the Chief Secretary justify that burden, and when will the Government show leadership and introduce a fair and sensible system of local taxation?
Andy Burnham: May I correct the hon. Gentleman? The Chancellor did not say that council tax would increase by 5 per cent. He said that the resources made available in the spending review will allow councils to keep rises substantially below 5 per cent.
In the three years of this spending review, including the current year, we have seen three of the four lowest council tax rises on record. I know that the hon. Gentleman and his colleagues like to blame us for everything, but I hope that he will accept that his party has some responsibility in these matters. I gently point out to him that the average council tax per dwelling for 2007-08 in Labour areas is £938, but in Lib Dem council areas it is £1,139a grand total of £199 more.
Miss Anne Begg (Aberdeen, South) (Lab): I can add to what the Chief Secretary said. In Aberdeen, under a Liberal council, our council tax is far higher than it ever was under a Labour council. What assessment has my right hon. Friend made of the impact on disposable income of a local income tax, if it were to be introduced? In particular, what would the impact be on families where both parents are working, at a time in their lives when expenditure on such things as a mortgage or bringing up children is probably at its highest?
Andy Burnham: My hon. Friend is right to raise such matters. It is important that we proceed with great caution in this area, and explain clearly to the public the implications of any changes to the council tax system. To amplify her point, I shall quote from the Lyons report, in which Sir Michael Lyons concluded:
I am not convinced, for example, that a pensioner household with a relatively modest income but significant savings or housing equity, is less able to pay than a young family with a larger income but no other assets. In this light I have some concerns, about whether abandoning property taxes for income taxes would be fair; in practice, this might simply replace one sort of perceived unfairness with another.
Miss Julie Kirkbride (Bromsgrove) (Con): I remind the Chief Secretary that in places such as Worcestershire, the council tax has more than doubled since 1997, which places a terrific burden on pensioners, who have not seen their pensions go up by 100 per cent. He might remember that back in 2005, the Government deemed that the burden of the council tax on pensioners was such that they should be eligible for £200 help towards it. However, since 2005, this help has not been forthcoming. Can the Chief Secretary explain why?
Andy Burnham: The Government have made help available to pensioners to deal with the council tax through council tax benefits. The council tax benefit rules are more generous for pensioners in that, if the claimant is over 60 and receives the guaranteed element of pension credit, there is no upper limit on the amount of capital that they may have.
We are helping pensioners through the council tax system, but I also gently point out to the hon. Lady that, whereas the average council tax per dwelling in 2007-08 in Labour areas is £938, in Conservative areas it is £1,200although that is slightly lower than in Lib Dem areas. I ask her for a little more humility in these matters, and more acceptance of the responsibility of the effects of her colleagues political decisions.
Dr. Nick Palmer (Broxtowe) (Lab): Does my right hon. Friend agree that one of the technical factors that tends to cause council tax increases in some areas is the operation of the floors-and-ceilings regime? It is intended to aid the transition to appropriate funding for local authorities, but over a long periodin the case of Broxtowe, five yearsit has the effect of leaving the council underfunded. Will he raise that issue in discussions with his colleagues in the Department for Communities and Local Government?
Andy Burnham: I thank my hon. Friend for his question. Having attended last week the cross-party group SIGOMA, the special interest group of municipal authorities, which represents a number of councils, I am more familiar than I ever wanted to be with the effects of damping, double damping and floors and ceilings. Now that the overall allocations have been made to Departments in the spending review, the matters that he raises are primarily the responsibility of the Secretary of State for the Department for Communities and Local Government. I am sure that the representations that he, along with other hon. Members, is making about the fairness of the allocation system for the fund will be heard during the course of the next few weeks and months.
The Exchequer Secretary to the Treasury (Angela Eagle): Delivering Value for Money in Local Government sets out the expected value-for-money savings for the years covered by the comprehensive spending review, and has been published on the Department for Communities and Local Government website. The target of 3 per cent. of net cash-releasing savings per annum is consistent with the wider public sector target. The relevant figures for 2008-09 show net cash-releasing savings of £1.1 billion resource and £0.4 billion capital.
Mark Pritchard: Will the 3 per cent. efficiency saving target be applied after the revenue support grant is given to councils or will it be top-sliced off the national RSG settlement before it is distributed to councils?
Angela Eagle: The distribution of the revenue support grant has been decided in the comprehensive spending review by an examination of the potential for efficiency savings and the pressures on specific individual resources. That has led to the 1 per cent. real-terms increase in the comprehensive spending review 2007 for local authorities. If the hon. Gentleman was accurate and top-slicing had occurred, the settlement would be minus 3 per cent.
The Exchequer Secretary to the Treasury (Angela Eagle): As Lord Leitch set out in his independent report about the United Kingdoms long-term skills needs, the improving skills profile in the UK work force over time has contributed to economic growth. The Government will increase expenditure on higher education and adult skills in England by more than £2 billion in the next three years. That will support further improvements in the UK skills base at all levels.
Richard Burden: I warmly welcome the investment in skills that was announced in the past week. Does my hon. Friend agree that, if we are to use the money effectively, it is important to point out that the skills required for excellence in our traditional manufacturing such as engineering and automotive are highly transferable to growth areasfor example, environmental technologies? Does she also agree that making that link in practice in our initiatives is important not only for prosperity but for raising aspiration in industrial areas, such as mine and hers, that are undergoing transition?
I could not agree more with my hon. Friend. In passing, I note that the National Skills Academy for Manufacturing was formally launched this year and that its head office is in the west midlands. One of the pilot areas for the train to gain technical
level 3 skills in the workplace is also in the west midlands. Nearly 7,000 west midlands businesses have been engaged with 8,000 low-skilled employees to improve their basic skills.
12. Mr. John Whittingdale (Maldon and East Chelmsford) (Con): What estimate he has made of the impact of the spending plans announced in the comprehensive spending review on the level of council tax in the next three years. 
The Chief Secretary to the Treasury (Andy Burnham): As my right hon. Friend the Chancellor set out in his pre-Budget report statement, we expect the overall council tax rise in the next three years to be substantially below 5 per cent.
Mr. Whittingdale: Is the Chief Secretary aware that the Local Government Association has described the spending plans as the worst financial settlement for councils in a decade? Is not it the case that, in counties such as Essex, where demand-led social services such as social care are increasingly costlythe costs are rising far faster than inflationthe inevitable result of the settlement will be higher council tax bills, which hit pensioners and many of the most vulnerable in society hardest?
Andy Burnham: Under the Government since 1997, real-terms growth in the funds that central Government provide to local government has happened in every single year. That was not the case before 1997, when there were real-terms cuts in the funding to local government. The funds allocated last week fulfil the bottom-line request of the Local Government Association in its formal submission to the comprehensive spending review. It is now up to councils to keep council tax down, and, as I pointed out to the hon. Member for Bromsgrove (Miss Kirkbride) a moment ago, the Conservative party bears as much responsibility as any other party for ensuring that that happens.
13. Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): What plans he has to tackle the issues concerning the tax credit system identified by the Parliamentary Commissioner for Administration. 
The Financial Secretary to the Treasury (Jane Kennedy): As I said earlier, the ombudsmans report is highly critical of Her Majestys Revenue and Customs and the tax credit system. On the positive side, it recognises HMRCs progress on administration and welcomes the change in policy that I outlined today for recovering overpayment. It makes further recommendations to ensure that the policy is effective. Her Majestys Revenue and Customs does not want to reject any recommendations outright. Some require thought about exactly how we respond to them, and I believe that we will be able to respond positively.
Does such a system...truly meet the needs of this particular customer group?
I hope, too, that she will take on board the advice of Citizens Advice that it might be time to look again at introducing fixed awards, which would improve stability. Is not the fundamental problem that people who are trying to budget on a weekly basis cannot cope with the retrospective nature of the changes to their finances? That puts them in such a difficult position that it is beginning to frighten people off from claiming.
Jane Kennedy: Citizens Advice has produced a serious report that looks at the issue carefully, but I do not see any evidence in a fall-off in the numbers of claimants who are receiving their entitlements. I acknowledge that there is a fear and I take that seriously, but tax credits offer a flexible system of support for 6 million families, as I have said, which equates to nearly 20 million people. Up to 700,000 families would receive less support under a fixed system. Although we are considering all such ideas, that is not the way to go. We must improve the delivery and administration of tax credits, which I believe is a better system than a fixed payments system.
The Exchequer Secretary to the Treasury (Angela Eagle): The Stern review found that the costs of avoiding the most dangerous impacts of climate change are significant but manageable and could amount to around 1 per cent. of global gross domestic product. Those costs will be minimised with co-ordinated international action and are significantly less than the costs of inaction. Modelling for the energy White Paper suggests that there could be transition costs to the UK economy of between 1 and 2 per cent. of gross domestic product in 2020 in reducing emissions by 30 per cent., working from the 1990 base.
Rob Marris: Climate change is of course a huge problem facing our country and the world. Far too often in this Chamber and around the world, we have debates on the causes of climate change, but not enough on the effects. May I seek my hon. Friends assurance that the Treasury will liaise with other Departments to ensure that that imbalance is rectified and that we have much more co-ordinated action between Departments, perhaps led by the Treasury as the main funder, on adapting to the inevitable climate change that we will experience, and are already experiencing, this century?
Angela Eagle: I can reassure my hon. Friend that that is precisely what the Treasury will be doing. The climate change Bill, which is due to come before the House, will create for the first time measured carbon markets and reductions. That will give us a tool to enable co-ordinated action in the UK. However, as he is aware, since the UK is responsible for only 2 per cent. of world emissions, international action is a key too.
The Leader of the House of Commons (Ms Harriet Harman): Before announcing the business I can tell the House that the Commons calendar, from November this year until October 2008, was published earlier today and is available in the Vote Office. I am sure that hon. Members will be interested to know that we plan to rise for the Christmas recess on Tuesday 18 December.
Monday 22 OctoberStatement by the Prime Minister following the European Council meeting. Motion to approve a Ways and Means resolution on the Serious Crime Bill [Lords]. Remaining stages of the Serious Crime Bill [Lords].
Tuesday 23 OctoberCarry-over motion for the Crossrail Bill followed by motions relating to the House of Commons Members Fund and a motion to take note of the outstanding reports of the Public Accounts Committee to which the Government have replied. Details will be given in the Official Report.
Wednesday 24 OctoberConsideration of Lords amendments, followed by consideration of Lords amendments to the Local Government and Public Involvement in Health Bill, followed by, if necessary, consideration of Lords amendments.
It may assist the House if I tell hon. Members that I have today published the Governments response to the Modernisation Committees first report of the 2006-07 Session, Revitalising the Chamber: the role of the back bench Member. It is now available to all hon. Members from the Vote Office. I intend to table the relevant motions in due course.
I hope that it will be possible to prorogue no later than Tuesday 30 October. The House will understand that that is subject to the progress of business in both Houses, but that looks the most likely date at the moment.
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